Exam 17: Promissory Notes, Simple Discount Notes, and the Discount Process

Ralph Corporation accepted a $15,000, 11%, 120-day note dated August 19 from Jay Company in settlement of a past bill. On October 20, Ralph Corporation decided to discount the note at a discount rate of 12%. The proceeds to Ralph Corporation is:

Use ordinary interest:

In calculating the bank discount when discounting an interest-bearing note, which one of the following is not used in the calculation?

Jone Corporation accepted a $25,000, 8%, 120-day note on July 8. Jone discounted the note on September 4 at Rool Bank at 7%. What proceeds did Jone receive? Use ordinary interest.

A promissory note:

Jill Corporation accepted a $16,000 note on Aug. 12. Terms of the note were 13% for 100 days. Jill discounted the note on September 28 at the Reno Bank at 14%. The proceeds to Jill would be:

The maker of a promissory note issues the note.

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2 at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

The maturity value of a $20,000, 7%, 75-day interest-bearing note dated September 10 is:

The maturity date of a promissory note represents when only the principal is due.

A $15,000, 6%, 50-day note dated November 8 is discounted at 5% on November 28. The proceeds of the note would be:

The maturity value of an interest-bearing note is principal minus interest.

The calculation of the bank discount when discounting an interest-bearing note uses maturity value.

An interest-bearing note can be discounted before the maturity date.

All interest-bearing notes must have the rate stated on the note.

J. Ryan discounts an 80-day note for $15,000 at 12%. The bank discount is (assume ordinary interest):

On July 18, Aui Lester accepted a $15,000, 7 3/4%, 180-day note from Ryan O'Flynn. On October 5, Aui discounted the note at Brome Bank at 8 1/4%. What proceeds did Aui receive? Use ordinary interest.

A simple discount note results in a higher interest rate (effective rate) than a simple interest note.

Use ordinary interest:

A $120,000, 5%, 200-day note dated June 6 is discounted on October 8. The discount period is: